Inflation will continue to be in a downward trajectory: Vivek Rajpal, Nomura India

In an interview with ET Now, Vivek Rajpal, Rates Strategist, Nomura India, gives his views on inflation numbers and the probable trajectory for the rupee in the current economic situation. Excerpts:

The inflation numbers have come out at 7.24%. What do you make of it?

It is a very positive number. It is a clear downward surprise. Last time WPI gave the downward surprise. Overall, it is a very positive number for all the asset classes related to India, especially for bonds.

What would be your estimation as to where you are seeing inflation headed because most believe that now the base effect is likely to kick in and we will have the inflation numbers flattening out?

Our view is that inflation will continue to be in a downtrend. There is no reason to believe that inflation should move higher from here on. In fact, if we look at the RBI trajectory, it was only worried about the inflation in the current quarter and the next quarter inflation anyway is falling. From here on inflation should fall at least in the first quarter through the next quarter.

What would be your view on the trajectory for the rupee now?

On the rupee we are seeing a pretty range-bound kind of a trajectory. By December-end we have a view that it will end around 54 levels. In the next quarter we will continue to see it quite range-bound between 54 and 55 kind of levels. Today’s inflation print is more of a story of bond markets and the rates market. So if inflation actually continues to fall, which allows RBI to support growth, that will be positive for the rupee. But the global risk environment will be very-very critical for the rupee.

For the financial year-end, where do you see the 10-year bond at?

By the financial year end, we see it at 7.80 levels.